[Vertex Protocol] [FINAL] [STIP - Round 1]

DAO Grant Programs Incentive Framework (Round 1)
1

SECTION 1: APPLICANT INFORMATION

Project Name: Vertex Protocol

Project Description:

Vertex is a cross-collateralized order book DEX with unified margin across spot and perps trading on Arbitrum. Since launching in April 2023, Vertex has grown to the leading DEX on Arbitrum by daily volume and is consistently one of the top 10 gas-consuming applications on the network.

Trading volumes to date exceed $7.9B in aggregate, with $2B traded in the last 30 days (as of October 2, 2023). During that period, Vertex has also achieved:

  • $9.1M in TVL.
  • 6,203 unique depositors.

TLDR: Vertex STIP Round 1 Highlights — Slide Deck:

Team Members and Qualifications:

Darius Tabatabai – Co-Founder: Head of Trading at CrossTower and JST; Global Head of Precious Metals Trading at CS and Global Head of Metals Trading at BAML; 20 years of trading experience in options, commodities, and FX.

Alwin Peng – Co-Founder: Youngest-ever employee at Jump; Founder at RandomEarth (NFT marketplace on Terra).

SJ Park – Head of Strategy: 10 years of trading experience in Rates and Credit; Portfolio Manager at Goldman Sachs.

Jeff Blockinger – General Counsel: 26 years of legal experience across multiple disciplines; Chief Legal Officer at Och-Ziff, taking Och-Ziff public in its IPO; CEO at Association for Digital Asset Markets.

Project links:

Contact Information

Twitter: @vertex_protocol

Email: community@vertexprotocol.com

Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?:

Yes

SECTION 2: GRANT INFORMATION

Requested Grant Size:

  • Trading Rewards = 1.35M – 2.55M ARB total (450K – 850K ARB per 28-day epoch)

  • Fusion Pools: Powered by Elixir Protocol (“Elixir”) Liquidity Incentives = Up to 450K ARB total (150K ARB per 28-day epoch)

  • Total = 1.8M – 3M ARB (600K – 1M ARB per epoch)

The higher end is achieved if:

  • Vertex averages in excess of 140M USD volume daily. (>2x current levels)

  • Elixir onboards > average 10M USD TVL.

  • Elixir currently has >5M in stablecoin liquidity demand for Vertex Fusion pools.

  • Naturally, this brings additional liquidity into the ecosystem.

About Elixir Protocol

As part of the Vertex proposal, the grant will help subsidize Elixir Liquidity Providers (“LPs”) (available on the Vertex front-end shortly) with a baseline level of $ARB APY that incentivize a core base of liquidity while increasing the volume of Vertex as an Arbitrum-native DEX that positively impacts broader Arbitrum chain at large.

Elixir’s protocol will be powering Vertex’s upcoming “Fusion Pools” product, allowing users to supply USDC collateral to build up the orderbooks of perpetual futures as well as spot pairs on the exchange. End-users will tap into the VRTX incentives offered by Vertex in our ongoing incentives to reward their liquidity.

Elixir is building the industry’s first decentralized, algorithmic market-making protocol. Through the Elixir Protocol, anyone will be able to passively supply liquidity to orderbook pairs on perp DEXes across the space, earning subsidized APYs from existing long-term liquidity incentive programs offered by exchanges like Vertex.

Elixir’s underlying infrastructure is decentralized and high-throughput. The off-chain protocol reaches consensus on every order placed on an exchange. The infrastructure is similar to Arbitrum’s security model, with the protocol’s fraud proofs posted on-chain after being validated by a network of (at the present moment) 15,000 testnet v2 validators. All contracts are audited by Trail of Bits, with the Vertex integration going live in the coming weeks.

Elixir has roughly $5M in institutional capital lined up as a core base of liquidity for Vertex pairs, not including the retail liquidity from farmers and users that this will unlock. On launch, they will also make it as easy as possible for users to bridge capital from any chain into the Elixir contracts on Arbitrum via a native Stargate integration.

For further information about Elixir:

Grant Matching:

Vertex currently runs a generous rewards program. The program will continue alongside the incentives program proposed below giving dual incentives for trading to users, with approximately 10M VRTX tokens being allocated to each epoch.

Grant Breakdown:

The grant will target increased volume and liquidity via Vertex’s highly performant orderbook architecture.

The grant will be used for three primary purposes:

  1. Incentivize Community-Based Market-Making (Elixir):

    • Vertex and Elixir have been partners for several months, and are poised to finalize the integration of Elixir’s Fusion Pools on Vertex’s front end, which allows retail users to LP orderbook pairs on Vertex and accumulate $VRTX Trading Rewards.

    • Incentivizing Arbitrum DeFi users deploying liquidity into the Elixir fusion pools on Vertex with a baseline APR of 15% in $ARB on their assets.

  2. Trading Rewards:

    • Rewards on trading fees up to a maximum of 75% of the taker fee paid. The balance will be split proportionately if:

    • 75% * Total Trading Fees > Allocated Grant Available

  3. Sequencer Fee Removal:

    • Should this proposal pass, Vertex is committed to removing sequencer fees on all trading pairs for the 3 months during which the incentives would be in effect. For a summary of Vertex’s sequencer fees, you can find them in the Vertex documentation here.

Trading fees and liquidity incentives evince a significant impact on the demand for trading on any given exchange venue. Vertex already offers class-leading fees: the grant’s motivation is to increase liquidity and trading volumes by introducing more users to the Arbitrum ecosystem via incentivizing liquidity and broader participation in the ecosystem.

The proposed grant would unlock a compelling trading incentive structure without sequencer fees – bringing more capital to Arbitrum to trade. Additionally, the proposal would empower Vertex to maximize the transaction activity of on-chain traders.

Paired with a performant orderbook and broad product offering, trading rewards will accelerate Vertex and Arbitrum’s growth trajectory, stimulating trading demand and onboarding new users into the Arbitrum ecosystem.

The grant for each epoch will be equal to the total of:

  • Trading Rewards = Min [USD Volume * Trading fees * 75%, 850K ARB per epoch]

  • Elixir Incentives = Min [15% * TVL * â…“, 150k]

Total = 600K - 1M ARB per epoch

If the total Taker Fees over 3 epochs (roughly three months) do not amount to a sum greater than 3M ARB, the remaining balance will be returned to the DAO.

Funding Address:

arb1:0x66993CA98A1ecf4F746FCDbDEdfC69E95529fB0E

Funding Address Characteristics:

3/5 multisig with securely stored private keys distributed across the Vertex core team.

Contract Address:

Vertex Router: 0xbbee07b3e8121227afcfe1e2b82772246226128e

SECTION 3: GRANT OBJECTIVES AND EXECUTION

Objectives:

The ultimate goal is to position Vertex as a premier order book DEX that can overtake dYdX as the leader in the DEX space within DeFi – attracting more liquidity and users to Arbitrum. Primarily, achieving a positive outcome means surpassing dYdX in both:

  1. Trading Volume

  2. User Base

Accomplishing the intended objective will elevate Vertex and Arbitrum, and infuse the Arbitrum ecosystem with increased liquidity and interest from traders – one of the largest user demographics within DeFi. Under extended bearish market conditions, pursuing a strategy that captures more traders and creates a moat around that inflow of new users is a compelling long-term tactic for the Arbitrum DAO.

A potential surge in trading activity and users can be harnessed by other projects in the Arbitrum ecosystem. For example, more organic, on-chain trading demand native to the network fosters a ripple effect across other Arbitrum projects where Vertex can serve as a liquidity hub for low-cost, performant trading.

Newcomers to the Arbitrum ecosystem seeking more cost-effective on-chain trading can use Vertex as a starting point to explore everything Arbitrum has to offer.

Key Performance Indicators (KPIs):

KPIs for success:

Elixir LP Program

Given the focus on TVL for this part of the program, 150K ARB is to be allocated every month for three months, with yield capped at 15% for LPs.

  • If TVL > 10M USD, all ARB will be distributed.

  • If the average TVL over that period is < 10M USD, then a pro-rata amount will be distributed, with the balance sent back to the DAO.

Note: Depending on the market price of ARB tokens and average TVL over the grant period.

Trading Rewards Program

The key KPI for the trading rewards program will be trading volumes. As set out in the grant size justification below, it is envisaged that the grant will only be fully utilized if average daily volumes are in excess of 140M USD daily (depending on ARB token prices during the course of the program).

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:

  • Bring TVL to Arbitrum:

    • Traders seeking to benefit from Vertex’s market-leading fees and proposed liquidity incentives during this period will need to deposit assets for trading on Arbitrum. The proposed incentive structure, combined with Vertex’s unified margin engine and hybrid design, provides a more compelling case for both retail and sophisticated traders to become Arbitrum-native users.

    • Liquidity Providers (LPs) market-making via Vertex’s partnership with Elixir Protocol will also need to deploy capital into the Arbitrum ecosystem.

  • Grow Liquidity:

    • The activity growth encouraged by incentives will also encourage more market-making activity. The benefits to market-making amplify as increased volumes boost market-maker profitability – capturing more institutional capital on Arbitrum.

    • This on-chain liquidity can be deployed to further other activity within the Arbitrum ecosystem, including yield strategies, arbitrage, and price discovery – all of which benefit other protocols besides Vertex.

    • The addition of Elixir Protocol will help distribute this activity to community members who can become a part of the core liquidity on Vertex.

  • Generate Sequencer Revenue:

    • Increased on-chain activity generates more revenue for the Arbitrum DAO via gas fees. Essentially, a portion of this grant converts ARB tokens into ETH sequencer fees, helping to diversify the DAO Treasury’s revenue source.

    • Diversifying treasury revenue sources is a highly relevant topic for the Arbitrum DAO at large, and has often been an area where many DAOs have struggled in the past – typically, maintaining a significant majority of their capital base in the native token. It’s an area where Arbitrum can choose to be more judicious and help promote activities that further this aim.

Justification for the size of the grant:

Liquidity incentives can potentially push Vertex volumes into the top spot for DEXs across ecosystems, unseating dYdX as the market leader – and benefitting the broader Arbitrum ecosystem. In the longer term, it would help Vertex evaluate the effect of lower fees for capturing more trading activity to the benefit of users and partners.

Trading Incentives

As incentives are disbursed there are two main outcomes:

  • <~140M USD Daily Volume:

    • Vertex fails to grow more than 2x from current levels.
    • Incentives are capped by 75% of trading fees provision.
    • Full grant request is not needed, estimated cost < 3M ARB.
    • Vertex gets scaling data on the effects of trading rewards to help direct business models in the future.
    • Arbitrum gets data on the cost-effectiveness of incentives to Vertex.

  • > ~140M Daily Volume:

    • Scale is achieved Vertex more than 2X.
    • Vertex grows into a high-volume market leader that absorbs more organic on-chain trading demand for Arbitrum.
    • Costs cap out at 2.55M total ARB, incentives distributed pro-rata vs. trading fees spent.

*NB – We use 140M as a reference point as we can think of it as the point where the incentives reach targeted effect by more than doubling Vertex’s trading activity.

  • 140M = (EpochGrant Size*Price_ARB)/(Vertex_FeeCapture/28DaysinEpoch)

Where:

  • ARB price = 0.8285 USDC and Vertex Fee Capture = 0.0175%

Elixir Incentives

In both cases, the absorption of new LP TVL into Vertex via Elixir should prove sticky and help provide backup liquidity to the existing market maker flow that exists on the platform, and cost no more than 450K ARB.

Execution Strategy:

  • The grant will be held in a â…— multi-sig.

  • ARB tokens will be disbursed using tooling already built for Vertex’s internal token program.

  • Elixir’s Fusion Pool incentives will be paid by the Vertex team using Elixir as agent.

Grant Timeline:

Once the grant is confirmed:

  • Establish three separate, four-week epochs (12 weeks total) commencing immediately upon the proposal’s passing.

  • Publicize the incentives to garner interest and on-chain trading demand.

  • Prepare a report on the grant results, which can be built quickly but will need at least four weeks of data to properly demonstrate efficacy.

  • Once the 3 months conclude, and if grants are not utilized, the remaining ARB tokens will be returned to the DAO treasury.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?

Yes

SECTION 4: PROTOCOL DETAILS

Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.

Is the Protocol Native to Arbitrum?:

Yes – Vertex is only available on Arbitrum.

On what other networks is the protocol deployed?:

N/A

What date did you deploy on Arbitrum?:

June 2022 - Core team commits to building on Arbitrum.

October 2022 - The first version of the protocol launches on Testnet.

April 2023 - Beta testing begins on mainnet with trading competition.

26th April 2023 - Full mainnet launch

—

Protocol Performance:

The charts and graphics below express Vertex’s current key growth metrics pulled from third-party data providers and internal dashboards.

Impressive & Steady Volume Growth:

Volumes on Vertex are gradually increasing amid an extended bear market and historically low trading volumes across crypto. As of October 2, 2023:

  • 7-day Volume = $391M
  • 30-day Volume = $2B
  • All-time Volume = $7.9B

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1484Ă—762 59.6 KB

Source – https://dune.com/frijoles/vertex?undefined=

Vertex’s growth places it amongst the fastest growing protocols across all of DeFi in the midst of a widespread bear market, as well as a leading derivatives DEX by volume. This grant application will help support Vertex’s low-cost, high-volume philosophy and help drive Arbitrum as the leading blockchain for on-chain derivatives trading: essential if dYdX dominance is to be challenged.

Chart1200Ă—742 60.2 KB

Source – Token Terminal (Percentage shown is share of Top 10 derivatives flow)

User Metrics:

Since launch, Vertex has onboarded approximately 6,000 unique users, with 150 - 550 users transacting on the platform on a daily basis. They have shown strong retention rates, and the average visit duration of roughly 11 minutes on the Vertex app is significantly above average for DeFi applications. The visit duration on the app exists in spite of geofencing the US market, where US-based web traffic closely mirrors the high bounce rate (~40%) for the Vertex app domain.

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Source – SimilarWeb (SimilarWeb Identity)

The user base continues to grow despite challenging market conditions, lagging market interest, and generally deflated volumes on crypto exchanges.

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Source –https://stats.vertexprotocol.com/

Liquidity:

Vertex’s order book provides over $1M of executable liquidity on BTC and ETH perps within 0.10% of mid-price at exceptionally low fee levels. Vertex’s integration with Elixir will further deepen liquidity and improve execution for trading.


Market depth is echoed on ALT pairs with liquidity in the range of $100K-500K within 0.20% of mid-prices.

Coupled with low fees, actionable trading depth on Vertex is unparalleled by other DEXs, which remain constrained by the TVL inefficiencies of AMM and pool-based models where liquidity is limited in some combination of depth, fees or scaling. Conventional x*y=k are incredibly inefficient, and at some point, pool-based derivatives DEXs are always at risk of exhausting their liquidity.

Gas Consumption:

Vertex consistently ranks amongst the top gas-consuming applications on Arbitrum.

The core Vertex contracts regularly consume 0.5% - 2.5% of the total gas fee market on Arbitrum.

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Source – https://dune.com/vrtxc/arbitrum-gas-usage

Protocol Roadmap:

The Vertex team has committed to community direction for roadmap planning as the protocol build is based on a responsive and agile philosophy that can adapt to the dynamism characteristic of DeFi. That being said, Vertex has pushed out numerous features since launch, including:

  • One-Click Trading: Allows users to sign one transaction from and begin trading without further wallet signing – offering users a simplified trading UX on par with CEXs.

  • Pools Page: Vertex’s integrated AMM enables LPs as margin and conventional x*y=k asset pools where liquidity from the AMM is injected into the orderbook.

  • Referrals: Anyone can generate a referral code and earn boosted trading rewards from their referrals.

  • Portfolio Page: More granular charts for user accounts on Vertex displaying portfolio stats like value, PnL, Balances, and Perp Trading.

  • Trading Pins: Users can always monitor their accounts with customizable pins within the Vertex UI to tailor their trading experience to their preferences.

  • New Markets: 23 markets have been added to Vertex since launch, including 19 perps and 4 spot markets.

Likely priorities for the next 12 months include:

  • Cross-chain integrations to help bring more users to Arbitrum.

  • Isolated Margin Accounts to simplify Vertex for retail users. Vertex utilizes unified cross-margin by default across spot, perps, and its embedded money market to maximize capital efficiency. Isolated margin would enable standard isolated margin perps as well, which are a popular request by users.

  • A mobile trading app to further expand Vertex’s appeal for different types of users. For example, the goal is to appeal to demographics like Robinhood traders in traditional equity markets who are interested in crypto trading and who primarily trade from the Robinhood mobile app.

  • Smart contract accounts to simplify and abstract away challenges with wallet UX.

Audit History:

Vertex maintains an ongoing relationship with the well-reputed auditing firm, OtterSec. OtterSec completed a full audit of the Vertex contracts prior to the mainnet launch, and continually provides auditing services and feedback on the Vertex codebase. The latest full audit from Ottersec is below:

SECTION 5: Data and Reporting

Provide details on how your team is equipped to provide data and reporting on grant distribution.

Is your team prepared to create Dune Dashboards for your incentive program?:

Yes. Vertex is integrated with Dune Analytics via dashboards created by third parties and the team also maintains internal reporting tools.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?

The proposed reporting would be based on constructing a suitable Dune Analytics dashboard specific to the outcome of the proposal’s incentives.

The dashboard would primarily capture the metrics expressed below as a rate of growth compared to the growth rate before incentives to illustrate a clearer picture of the incentives’ overall impact. This approach allows for isolating changes directly attributable to the incentive program, where a comparison of the post-incentive growth rates to the pre-incentive rate can be more accurately evaluated.

Comparison of the following growth metrics on a relative basis before and after the proposed incentives include:

  1. Trading Volume: Measure the percentage change in trading volume, comparing it to the pre-incentive period.

  2. Protocol Revenue: Calculate the percentage increase in trading fee revenue relative to the pre-incentive period.

  3. New User & Retention Rate Comparison: Measure the percentage growth in the number of new users and active users compared to the pre-incentive phase – along with any changes in the user retention rate. This data can be supplemented with publicly available web traffic tools and analytics.

  4. TVL Growth: Measure the growth of TVL during the incentives period.

  5. Cost Analysis: Sequencer fees & market maker rebates changes.

More specific to the broader impact on the Arbitrum DAO, analyses composed of the following will also be applied to the dashboard:

  • ARB token impact: Report on how many tokens are distributed and to how many wallets

  • Gas Consumption Rate: Measuring any statistically significant variance in on-chain gas consumption of the Vertex contracts relative to current and historical data.

These metrics will help draw conclusions on the impact of token grants and how they can influence future thinking on Vertex’s fee model. They will also provide actionable data on how to optimize grants utilizing alternative incentive models in the future.

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?:

Yes

22 Likes
2

First of all, I would like to mention that Vertex is a perp-dex app that I use and love every day.

I have been following the project since the testnet phase, and it continues to grow day by day, as evident from user metrics, by adding different user-friendly features every day.

In my eyes, Vertex should be the first project to be included in this round.

7 Likes
3

Vertex is an all in one Dex, experienced team with great community growing organically.
Great and unique proposal I must confess!

4 Likes
4

Been using Vertex as my main trading platform for swings and scalping since June now. It’s incredible, super fast, low fees and deep liquidity. Never had any issues and support team on discord is very active.

4 Likes
5

Vertex’s product is truly revolutionary. Along with proven technologies, Vertex also has unique solutions.

1 Like
6

Its a Win-Win, easy !

2 Likes
8

Vertex are doing well and good perp DEX, but unfortunately this is way too much for a protocol of this size.

Vertex doesn’t have a token, and therefore it is hard to say how much of its current activity is from potential airdrop hunters.

The amount requested should be significantly reduced to reflect Vertex’s time live in the ecosystem.

I do think that the use of these incentives is better structured than other perp DEXs, which is good.

4 Likes
9

Thorough and well laid out proposal guys. Your protocol has taken a unique approach vs. the usual copy pasta and I believe what you are building offers a competitive alternative to CEXs. As more of crypto users leave CEXs and try DeFi, I think Vertex is positioned to be a leading option. Therefore, as laid out in the KPIs in the proposal, I could see Vertex brining a lot of growth to the Arbitrum ecosystem indeed. Excited to see what the result is and also for isolated trading.

1 Like
10

Great proposal

I’ve been an avid follower and user of Vertex since its inception. I’ve admired their consistent dedication to development and service delivery, as opposed to indulging in unnecessary hype, they keep building and building an easy-to-use platform.

Even as someone who typically steered clear of trading and perpetual, I found myself consistently utilizing their product.

Our admiration for Vertex’s achievements runs so deep that we’ve extensively covered their progress through multiple threads shared across our social media platforms.

It’s clear that Vertex has successfully onboarded numerous users into the Arbitrum ecosystem, and we’re enthusiastic about extending our support to them.

To do our part to support true builders we even invited them to our upcoming campaign which goes live soon.

3 Likes
12

Thanks for the reply - worth noting a few things:

  • Vertex is doing more volume than anyone else in the ecosystem currently

  • Our token isn’t live but it is clear exactly what people are earning by trading with us. All of that is documented and shown on our platform.

  • The platform can scale to challenge big contenders. This is not true of others

  • Our ask scales with success - if our proposed changes are unsuccessful, then the ask is lower. If we achieve scale/success then the ask is higher and arbitrum will have the leading dex across all chains on its platform. Incentives are aligned. This is not true of other proposals in this program that simply encourage farm and dump.

4 Likes
15

A truly innovative protocol, not just another GMX fork, built on Arbitrum. Tons of innovations from this insanely smart team which aren’t really talked about enough imo. Also, its relatively unknown how well they have been doing even pre-TGE, adding a grant into the mix will only help them take off further and drive tons more transactions and volume into the Arbitrum ecosystem. Vertex’s 30d volumes are already phenominal, and able to rival many other perp platforms. I urge everyone to take a careful look at the data backing this proposal. Considering this, I believe the ask is very reasonable.

I am in full support of this proposal.

6 Likes
17

Some facts:

  • Our proposal is a maximum: successful = more grant vs unsuccessful =less grant.

  • Most protocols have not offered performance based deals and as such the vast majority are simple farm and dump schemes: Good for protocol teams and bad for Arbitrum.

  • We designed something good for Vertex AND Arbitrum where we have to deliver… If we fail, then we get very little support. This is a win-win.

  • We are the leading protocol by trading volume on Arbitrum and a top 10 dex in defi and have done this without any support up to this date by innovating and driving new technology and product. We are in this for the very long term.

The DAO should be a long term enterprise. To do that it will need to align with teams that have a similar long term mindset via proposals that put real skin in the game.

8 Likes
19

As the decentralized finance (DeFi) space continues its rapid evolution, choosing protocols that resonate with our blockchain’s ethos and drive real-world adoption is crucial. It’s in this context that I’d like to emphatically recommend Vertex Protocol for your consideration and support.

Several factors make Vertex Protocol not just another protocol but an essential addition to the Arbitrum ecosystem:

Loyalty to Arbitrum: In an era where protocols are stretching themselves thin by attempting to be present on multiple chains, Vertex stands out with its exclusive commitment to Arbitrum. Instead of dividing their attention across countless networks, Vertex has chosen to build solely on Arbitrum, exemplifying their faith in the Arbitrum Layer 2 solution and ensuring a symbiotic relationship that can lead to unparalleled innovations.

Comprehensive Product Suite: Investing in Vertex isn’t just backing a singular platform; it’s an endorsement of an integrated suite of DeFi solutions. With spot, money market, and perpetual exchange offerings, Vertex is tapping into multiple market segments under one roof. This not only enhances capital efficiency but also offers a one-stop solution for both retail and institutional traders, potentially driving more users to Arbitrum.

Leading the Pack: Vertex isn’t just another participant in the DEX race; it’s setting the pace. Leading the charts in exchange volume, Vertex demonstrates not just popularity but trust, reliability, and performance. This position of leadership, coupled with Arbitrum’s scaling solutions, can revolutionize DeFi trading experiences.

Genuine Innovation: The crypto world is replete with forks and replicas. However, Vertex Protocol differentiates itself by being genuinely unique. Their approach to DeFi solutions, coupled with their technology stack, sets them apart from being just another forked protocol. Their originality not only augments their value proposition but also enhances Arbitrum’s portfolio of genuinely innovative projects.

5 Likes
20

I would argue that this is the most important project in all DeFi, and the only one with any long term future in the EVM world.

Vertex is the first dapp - not just on Arbitrum, but in all crypto - that (successfully) merged the three components of any viable financial market and brought them to DeFi: spot markets, derivatives markets, money markets. Get on any registered broker in the US or Europe and try to trade stocks and ETFs, you will see that all three markets are present and working together. There is advanced margining procedures which ensures overt risk taking doesn’t hurt the system.

Why do you think Binance is so big? Answer: It’s because their centralization allows all three components to come together on one platform, which is exactly how exchanges should be. That’s why DeFi has no users except for decentralization and non-KYC maxis. The UX just sucks compared to a centralized venue.

Now enter Vertex. You got all three components under one roof. Settlement and risk calculations all happening on chain. Self-custody. It’s DeFi, but with everything that legacy DeFi was missing. And guess what? Market makers and institutions love it (hence the deep liquidity) because these guys actually built a trading engine that any script kiddie can plug into and start executing automated strategies.

Let’s get back to the point - Arbitrum. How to grow our beloved Arbitrum. The answer is twofold: users and utility. With utility, you get more users. So far, Vertex’s features as a DEX exhibit the most utility out of all the other protocols on Arbitrum. You can see that because it is now doing the most trading volume on Arbitrum - the point of an exchange is obviously to trade, so volume should be the most important metric here. Now look at how small its TVL is compared to the others. This is indicative of people using Vertex strictly for trading and not for some rent seeking, yield farming games. Also, it is indicative of very high capital efficiency: normally you cannot generate that much volume with that little TVL, but when you have superior capital efficiency, outsized volume is to be expected. But of course, Vertex users already know about the capital efficiency :wink: What this means for Arbitrum is that people will use Vertex just for trading. Once they have done their trading, they can move that TVL elsewhere for Web3 dapps (if they ever appear) or to more passive DeFi dapps on Arbitrum. THIS IS WHAT GROWS ARBITRUM. Picture concentric circles around Vertex, where value pours out from this super performant exchange that attracts true crypto believers from other ecosystems with its low fees and superior features. These users will bring in tremendous amount of assets to trade, and many of them will stay, pumping more TVL into the ecosystem. Meanwhile, Vertex doesn’t need the TVL. It makes money from trading fees, and people will keep trading there because honestly I haven’t seen a venue cheaper or faster.

If you believe DeFi has a future, then this is the one project you should be backing! Diversification is a hedge against ignorance. Never forget that. If you didn’t know, now you know.

Vertex Team, my only critique is that I wish yall had vanilla calls and puts. Come on sers, we’re so close to flawless!

4 Likes
21

Could you explain the expected number would be? It is good to know it is a maximum, but it would be great if you could share more info about what the real estimated number would be.

1 Like
22

I respectfully disagree on that. Having keenly observed the trajectory of numerous DeFi platforms, it’s evident that Vertex’s approach and dedication are worth our attention.
Vertex’s unwavering commitment to Arbitrum, in particular, is a strategic move that’s hard to overlook. Such dedication signals a deep belief in Arbitrum’s potential and a long-term vision, distinguishing Vertex from many fleeting endeavors in this space.
Regarding the size of Vertex, it’s pivotal to look beyond the present moment. Growth rate and potential often precede actual size, and by that metric, Vertex is on a commendable trajectory. The pace at which they have scaled, even in a crowded ecosystem, is indicative of their innovation and market resonance.

Furthermore, when discussing longevity in the volatile DeFi space, it’s essential to consider the underpinnings of a project. Vertex’s robust foundational structure and their positioning in the market suggests they’re in this for the long game, rather than a brief stint.
While the financial considerations of their proposal are indeed significant, it’s worth reflecting upon the potential return on investment. Vertex’s potential for growth and the innovation they promise could be invaluable assets to the Arbitrum ecosystem. Furthermore, a pertinent observation in the current DeFi landscape is the ephemeral nature of many projects. It’s an unfortunate reality that a significant number of these platforms, despite their initial promise, may not survive the test of time. This underscores the importance of strategic incentivization. Rather than distributing resources thinly across a plethora of projects, it might be more judicious to focus on protocols that display tangible potential and resilience, such as Vertex. This approach not only optimizes the utilization of resources but also fortifies the Arbitrum ecosystem with candidates most likely to yield long-term benefits.

2 Likes
23

I didn’t know Vertex made up such a large portion of gas use on Arbitrum. That’s really impressive. It’s rare to see such a high powered eng team and biz team come together. I think this could be a great partnership to help Arbitrum further develop a suite of flagship protocols. Excited to see where this goes!

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We would expect the expense to be in the range of 800k-4.5m basis our volume changes in the next few months. Given the nature of fee adjustments and the fact we also release our token in that time, it is our expectation that 1b daily is achievable and worth accounting for.

Please see the table and notes below for more details.

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Hey! Thanks for all the kind words!

We feel like a lot of folks do not understand quite how much Vertex has brought to Arbitrum since our launch. We are the leading DEX by both trading volume and Gas consumption over the last 30 days. Yet most still seem to think GMX has that top spot…

Hope you don’t mind but I have quoted the relevant portion to help others whilst they read through the comments!

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Appreciate this thoughtful reply!

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